SP Setia buying Penang land from Boustead Plantations for RM620.12 million

PETALING JAYA: SP Setia Bhd is buying five parcels of land measuring 677.78 hectares in Seberang Perai Utara, Penang from Boustead Plantations Bhd (BPB) for RM620.12 million.
In a filing with the stock exchange, SP Setia said the land is planned for the development of a mixed development township, which will comprise landed and high-rise housing development and commercial components.
Barring any unforeseen circumstances, S P Setia targets to launch the township development on the Land in 2019/2020 and is expected to take 15 to 20 years to complete.
However, the property developer said at this juncture, it is preliminary to ascertain the development costs, expected profit and
additional financial commitment for the development.
Meanwhile, BPB said it had on December 22, 2016 entered into a sale and purchase agreement with SP Setia's subsidiary Setia Recreation Sdn Bhd for the land sale.
The sale consideration represents a premium of RM7.1 million or 1.16% over the market value of the land of RM613.0 million or RM8.40 per square foot accorded by the valuer, resulting in an estimated gain of about RM527.3 million.
Proceeds from the disposal will be used to acquire oil palm plantation land/companies (RM300 million) and repay bank borrowings (RM287 million). This in turn, will reduce BPB's gearing ratio from 0.42 times to 0.23 times.
As at September 30, 2016, BPB's cash deposits stood at about RM387.0 million. Upon completion of the proposed sale, it is expected to increase to about RM687 million.
"This gives BPB group the opportunity to use the funds to undertake strategic investments and expansion in new plantation land banks at lower costs when available, hence growing BPB's plantation revenue and profits in the future," it noted.